Cranston City Council unanimously passes ordinance against payday loans

"I was proud to stand behind it last night," said Councilmember Ferri. "This is why I ran for office in the first place. You want to make a difference in things like this."

On Monday, the Cranston City Council unanimously approved an ordinance to regulate short-term lenders, also known as “PayDay” lenders. The ordinance was sponsored by City Councilmember Robert Ferri, and co-sponsored by Council President Jessica Marino, and Councilmember John Donegan, all Democrats.

The ordinance requires short-term lenders within Cranston to secure a license to issue short-term loans and limits those lenders to issue no more than two loans per customer per calendar year. Currently and in the past, if the loan was not paid back within the relatively short term (typically 14 days), then the loan was automatically renewed and a new service charge was added. These predatory fees drove up the cost of borrowing to customers dramatically, with many spiraling further into debt. Under this ordinance, the maximum fee charge is now 10% of the original loan. The ordinance assures that the maximum APR will now be 36% versus 260%.

I’ve written about the evils of payday loans and other kinds of predatory loans here.

You can watch the council discussion on the ordinance here:

I spoke to Councilmember Ferri on the phone Tuesday evening:

Robert Ferri: It’s called Predatory lending. Many years ago, my brother [former State Representative Frank Ferri] and I owned a business together and we had this employee - a nice guy - he was one of our mechanics. He went up to my brother one day and said, “I need to borrow a lot of money. I got a problem.”

And my brother was like, “What's the problem?” And he said, “I owe these payday lenders a lot of money.”

Turns out our employee owed something like three times what he borrowed. It was ridiculous. My brother was a State Rep at the time, and he got furious about it. How can this happen?"

Steve Ahlquist: But your brother was unable to do anything about it in the General Assembly.

Robert Ferri: I guess for 13 years lobbyists have been standing in front of the state Reps and Senators saying this isn't needed.

Steve Ahlquist: So how did these local ordinances happen?

Robert Ferri: The Coalition for Payday Lending Reform is bringing this to the cities and towns. They brought it to Woonsocket last month and it just got passed. It's going through Providence right now. They contacted me because they know my relationship with my brother. They knew my brother had done this. They asked me if I would be interested in bringing this to Cranston and I said absolutely.

I gave it to the council attorney. We went over it. We wrote it after Woonsocket's ordinance because why recreate the wheel?

Steve Ahlquist: There was only one member of the public opposed to the ordinance.

Robert Ferri: Bob Murray said that the City could be sued by the State over this but our council attorney was well prepared and said, “Look, this is the way it is. We've got a lot of cities and towns signing onto this. The state is not going to sue the cities and towns over this.”

Only one council member, Nicole Renzulli, spoke a few words against it, but I pleaded with everyone. This is why we run for office - to make a difference in people's lives. It passed unanimously. Even the person who spoke against it, Nicole Renzulli, signed on as a co-sponsor.

Steve Ahlquist: I've been writing about how terrible these payday loans are for ten years. Last year the House passed legislation against them, but the Senate demurred. If the Senate gets their shit together we could join every other New England state in banning them this year.

Robert Ferri: Which is good. I think the momentum was to get the cities and towns rolling on it. I was proud to stand behind it last night This is why I ran for office in the first place. You want to make a difference in things like this. I have firsthand knowledge. I had an employee that got himself buried in one of those loans.

Steve Ahlquist: This is tangentially related, but while I have you: You're running for Mayor of Cranston?

Robert Ferri: Yeah. I had this dream one day that I was going to run for mayor and I haven't woken up yet. I'm having a blast. I'm telling you, it's going so well and everything is coming into place right now.

Steve Ahlquist: We should interview about that.